9. Leases

We determine if a contract contains a lease at inception. Our material operating leases consist of restaurant locations as well as office space. Our leases generally have remaining terms of 1- 20 years, most of which include options to extend the leases for additional 5-year periods. Generally, the lease term is the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods up to a term of 20 years.

Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases. As we have no outstanding debt nor committed credit facilities, secured or otherwise, we estimate this rate based on prevailing financial market conditions, comparable company and credit analysis, and management judgment.

Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term.

Some of our leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales in excess of stipulated amounts. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Related to the adoption of Topic 842, our policy elections were as follows:


Separation of lease and non-lease components		We elected this expedient to account for lease and non-lease components as a single component for our entire population of operating lease assets.
Short-term policy		We have elected the short-term lease recognition exemption for all applicable classes of underlying assets. Short-term disclosures include only those leases with a term greater than one month and 12 months or less, and expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less, that do not include an option to purchase the underlying asset that we are reasonably certain to exercise, are not recorded on the balance sheet.

Supplemental balance sheet information related to leases was as follows:



		March 31,
Operating Leases	Classification	2019
Right-of-use assets	Operating lease assets	$	2,349,993

Current lease liabilities	Current operating lease liabilities		157,665
Non-current lease liabilities	Long-term operating lease liabilities		2,513,901
Total lease liabilities		$	2,671,566


Lease term and discount rate were as follows:
	March 31,
	2019
Weighted average remaining lease term (years)		13.5
Weighted average discount rate		5.27%

The components of lease cost were as follows:



		Three months ended
		March 31,
	Classification	2019
Operating lease cost	Occupancy and General and administrative expenses	$	76,805
Short-term lease cost	Other operating costs		737
Variable lease cost	Occupancy		9,104
Sublease income	General and administrative expenses		(766)
Total lease cost		$	85,880

Supplemental disclosures of cash flow information related to leases were as follows:



	Three months ended
	March 31,
	2019
Cash paid for operating lease liabilities	$	71,832
Operating lease assets obtained in exchange for operating lease liabilities(1)		2,401,239

(1) Amounts for the three months ended March 31, 2019 include the transition adjustment for the adoption of Topic 842 discussed in Note 2. “Accounting Policies.”

Maturities of lease liabilities were as follows as of March 31, 2019:



	Operating Leases
Remainder of 2019	$	194,583
2020		295,326
2021		292,860
2022		292,670
2023		288,138
Thereafter		2,442,438
Total lease payments		3,806,015
Less: imputed interest		1,134,449
Present value of lease liabilities	$	2,671,566

As of March 31, 2019, operating lease payments include $2,082,123 related to options to extend lease terms that are reasonably certain of being exercised and exclude approximately $87,500 of legally binding minimum lease payments for leases signed but not yet commenced and $9,672 of future sublease income.

As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting, maturities of lease liabilities were as follows as of December 31, 2018:



	Operating Leases
2019	$	294,191
2020		296,579
2021		294,941
2022		295,290
2023		290,980
Thereafter		2,478,397
Total minimum lease payments	$	3,950,378

As of December 31, 2018, maturity of lease liabilities have not been reduced by minimum sublease rentals of $11,790 due in the future under our subleases. As of December 31, 2018, we have $90,484 of legally binding minimum lease payments related to restaurant leases that have not yet commenced.

We have six sale and leaseback transactions, which do not qualify for sale leaseback accounting due to fixed price renewal options prohibiting sale accounting. These transactions are accounted for under the financing method. Under the financing method, the assets remain on the condensed consolidated balance sheet and the proceeds from the transactions are recorded as a financing liability. A portion of lease payments are applied as payments of deemed principal and imputed interest. The deemed landlord financing liability was $2,327 and $2,390 as of March 31, 2019 and December 31, 2018, respectively, with the current portion of the liability included in accrued liabilities, and the remaining portion included in other liabilities on the condensed consolidated balance sheet.